The question is: are these share buyers cleverly spotting businesses that are about to grow astronomically, or are they wasting their money on companies destined never to make a profit?

The rush of interest in shares listed on London's junior stock exchange – the Alternative Investment Market, or Aim – is due to a change in rules last month that made these shares eligible for inclusion in tax-free Isas for the first time.

The effect has been dramatic. In the two months before the rule changes, 15.6pc of all share purchases made through Hargreaves Lansdown, the stockbroker, involved Aim-listed companies. But in August this figure increased to 23.6pc, a rise of 51pc.

In August, 14pc of all money put into shares was invested on Aim, compared with 9.7pc in the previous two months. This is a rise of 44pc. Some of the purchases were the result of investors selling an existing holding of Aim shares and repurchasing them within an Isa to shield them from future tax liabilities, said Danny Cox of Hargreaves Lansdown. This technique is sometimes called "bed and Isa".

Other stockbrokers report similar rises in Aim-related trading. Sippdeal said volumes were up by a quarter, while figures from the London Stock Exchange, which also included trading by institutions, painted the same picture. One investment website, Interactive Investor, said trading volumes had doubled.

The increased activity seems to have pushed up the share prices of Aim companies. Since the Isa rule change, the FTSE Aim All Share has risen by 4.9pc, whereas the FTSE 100 has fallen by 2.7pc.

The change, which took effect on August 5, is especially significant because Aim shares were already exempt from inheritance tax as long as they were held for at least two years. Holding Aim shares in an Isa therefore allows you to avoid income, capital gains and inheritance taxes.

Aim-listed commodities companies such as gold miners and oil explorers were among the most popular choices of investors following the rule change.

But investors who buy this kind of share are exposing themselves to three kinds of risk beyond those that are unavoidable when you enter the stock market.

First, buying individual shares is more risky than buying a diversified fund, unless you choose a good range yourself.

Second, Aim-listed shares are more risky than those that belong to the "main market", partly because they are smaller and more recently established but also because the qualifications for joining Aim are less onerous. This has led some commentators to call Aim the Wild West of the stock market. Since its inception on January 2 1996, the FTSE Aim All Share index has fallen by 24.7pc. Over the same period the FTSE 100 grew by 75.3pc.

Last, companies involved in exploration for natural resources such as oil, gas and gold, are among the riskiest of all. If you explore for gas, say, and then find nothing, the money you raised to do it is down the drain. Resource shares are among the most volatile of all, often plummeting in value on bad news from the exploration site.

Does this mean that more cautious investors should avoid Aim altogether? Or are there safer ways to get exposure?

Adrian Shandley, the head of Premier Wealth Management, said: "I do not see investing in Aim through Isas as something that you would do with your first, second or even third Isa unless you were a very informed investor. In order to reduce risk within Aim, you need to diversify and take professional advice."

He said Aim-listed shares "frequently go bust" and only a small percentage of them were worth investing in.

But he added: "If an investor has a large Isa portfolio currently, and can transfer this into an Aim portfolio that is professionally managed and advised on, then the inheritance tax benefits are enormous. Investors must be willing to take on the risks associated with Aim and invest for two years or more."

Mr Shandley said the rush of new money into gold and mining companies could inflate a bubble and that a better option would be to look at established gold and natural resources funds, although he didn't feel confident enough about the sector's prospects to recommend any.

Or, for a more diversified alternative, he recommended UK smaller companies funds such as Fidelity's UK Smaller Companies or Cazenove UK Smaller Companies. These will not benefit from the inheritance tax breaks, of course.

Giles Hargreave, who manages the Marlborough Special Situations fund, pointed out that it was easier for a company to grow from £1m to £100m than from £100m to £1bn but added that Aim shares were "illiquid" – meaning that you can't be sure that you can buy and sell when you want – and dangerous to buy individually.

Paul Taylor, the head of McCarthy Taylor, another advisory firm, said: "While we use Aim shares, particularly in inheritance tax planning for wealthy clients, they are a high-risk investment for the average investor.

"By definition these smaller companies are more vulnerable and are less well capitalised than main listed shares. It is not unusual for them to lose significant value, and the current surge of interest in them smacks of the 'emperor's new clothes' – there is a danger that people will be encouraged to invest in fledgling companies without fully exploring the risks.

"What is often not understood is that sometimes the greatest risk of failure is in a recovering market, when growth takes off and the risk to smaller businesses is the lack of cash flow, having burnt any cash reserves in the recession. As demand picks up so does the requirement for working capital, and often this causes significant problems – and even failure – for smaller businesses."

The commonly held view is that Aim is synonymous with volatility, risk and poor performance. Many retail and professional investors have shunned it since the collapse of the equity markets in 2008 and early 2009. Fund managers have been known to attribute their underperformance to Aim. We seek to differ.

While it is certainly true that an investor in an Aim-listed company can lose a significant part, or even all, of their investment, and low levels of liquidity can increase share price volatility, it's our view that a company's fundamentals, business model and management ultimately determine the success or failure of an investment, and not the exchange on which the company's shares are listed.

With three times as many companies as the FTSE 350, the scale of the market opportunity on Aim presents investors with a challenge that sits alongside the opportunity. The inefficient flow of information and reduced amount of analyst coverage, which cannot be adequately overcome with traditional desktop tools such as Bloomberg, is another barrier to be overcome. As a result, the market is large, under-researched, less efficient and therefore more likely to contain pricing anomalies. It is a place for stock pickers and those prepared to make the necessary investment in time and effort. Those who do so will find that Aim is home to a wide variety of businesses.

Many Aim-listed companies are young and dynamic, often operating in new and emerging sectors. MyCelx is one such example. It is a water technology company that provides clean water solutions to the oil, gas and petrochemical industries. Its patented polymer is capable of permanently removing free, emulsified and dissolved hydrocarbons in water. Revenues are forecast to grow to $24m (£15m) in 2013, up from $4m in 2010.

WANdisco is another example of a young and rapidly growing company with an emerging technology. The company provides computing technology that enables software developers in separate locations to work simultaneously. Customers include a host of Fortune 1000 companies such as Hewlett-Packard, Intel, John Deere, Barclays Capital and Nokia. Its revenues are forecast to grow from $4m in 2011 to $15m in 2014.

Yet Aim offers much more than "frontier investing". It is also home to numerous established and more traditional businesses. Asos, the online retailer, Brooks Macdonald in financial services, Majestic Wine, Nichols (which owns the Vimto and Sunkist brands), the restaurant operator Prezzo and Vertu, the motor retailer, are good examples.